So far the markets are holding up. But all it will take to start the cascade is the failure of a couple banks. The government could fix the problem, but I believe most do not realize the magnitude of the problem. Take a look a Nancy Pelosi if you get a chance. She looks 20 years older than she did last week. My guess is that she understands the magnitude of the problem now. Once the banks start to fail I doubt if they will be able to stop it. Before the cascade starts it doesn’t appear that difficult to fix the problem.
The banks (BKX) are above the July low and in a good position to move higher. The relative strength of the financials is better than that of the major equities indices.
The Transports (TRAN) have weakened in the past week but remains above the 1:1 descending Gann angle which is still bullish.
Charts courtesy of Stockcharts.com
The Russell 2000 (RUT) remains above the 1:2 angle which is the line in the sand. The support provide by this angle is not infinite. If the market turns up around October 10th then this may be ok. As I said previously, wait, watch, and react.
Post Modified: October 1st, 2008 at 7:41 pm
Tags: Financials · Russell 2000 Smallcaps · TransportsNo Comments
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